UNDP, UNICEF and UN Women COVID-19 | HEAT Series

UNDP,UNICEF and UN Women EASTERN CARIBBEAN

SAINT LUCIA COVID-19 HEAT REPORT HUMAN AND ECONOMIC ASSESSMENT OF IMPACT

Based on research conducted by Dr. Indera Sagewan

www.bb.undp.org https://caribbean.unwomen.org www.unicef.org/easterncaribbean COVID-19 | HEAT SERIES COVID-19 HUMAN AND ECONOMIC COVIASSESSMENTD-19 HEAT Series OF IMPACT

COVID-19 HEAT SERIES

ANGUILLA COVID-19 HEAT Report- Human and Economic Assessment of Impact ANTIGUA AND BARBUDA COVID-19 HEAT Report- Human and Economic Assessment of Impact BARBADOS COVID-19 HEAT Report- Human and Economic Assessment of Impact

BRITISHVIRGIN ISLANDS COVID-19 HEAT Report- Human and Economic Assessment of Impact

COMMONWEALTH OF DOMINICA COVID-19 HEAT Report- Human and Economic Assessment of Impact

GRENADA COVID-19 HEAT Report- Human and Economic Assessment of Impact

SAINT LUCIA COVID-19 HEAT Report- Human and Economic Assessment of Impact

SAINTVINCENT ANDTHE GRENADINES COVID-19 HEAT Report- Human and Economic Assessment of Impact

Disclaimer: COVID-19 HEAT Series July 2020

The views, designations, and recommendations that are presented in this report do not necessarily reflect theofficial position of UNDP, UNICEF or UN Women.

2020 | UNDP, UNICEF & UN Women 2 COVID-19 HEAT Series

ACKNOWLEDGEMENTS

Resident Representative UNDP Barbados and the Eastern Caribbean, Magdy Martinez -Soliman Representative UNICEF Office for the Eastern Caribbean Area, Aloys Kamuragiye Representative a.i. UN Women Multi-Country Office for the Caribbean, Tonni-Ann Brodber

Technical Team

Jason LaCorbiniere,UNDP - Lead Coordinator

Maya Faisal,UNICEF - Coordinator

Isiuawa Iyahen,UN Women - Coordinator

Lyanna Harracksingh,UNICEF

Debbie Budlender,UN Women

Stuart Davies,UN RCO

Gonzalo Fanjul,IS Global

Shani Leacock,UNDP

Melissa Bohne,UNDP

The authors and technical team are grateful for the support of all individuals across various Government ministries, agencies and departments who provided data and feedback on the drafts.

2020 | UNDP, UNICEF & UN Women 3 COVID-19 HEAT Series

TABLE OF CONTENTS

EXECUTIVE SUMMARY...... 6

CONTEXT...... 7

MACROECONOMIC...... 7

FISCAL...... 8

MONETARY...... 9

CHANNEL OF IMPACT...... 14

EXTERNAL ...... 14

DOMESTIC...... 14

IMPACT ANALYSIS...... 16

MACRO IMPACT...... 16

FISCAL...... 18

SOCIAL...... 19

RECOMMENDATIONS...... 25 ANNEX...... 27

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COVID-19 MACROECONOMIC AND HUMAN IMPACT ASSESSMENTFORSAINTLUCIA

INDICATORS VALUE

Demographic Age Dependency Ratio (World Bank Stats) 2018 40%

Labour Force (Social and Economic Review) 100,976 % of Labour Force Female (CSO Saint Lucia) 47.60%

Population (CSO Saint Lucia) (2018) 178,696 Macroeconomic

Gross Domestic Product (2018) (USD) 1,922,000,000

GDP Per Capita (Gov’t of Saint Lucia) (USD) 11,877.4 Expected GDP growth rate (Caribbean Development Bank) 1.5% Inflation (Caribbean Development Bank) 0.2%

Fiscal

Debt to GDP Ratio (Caribbean Development Bank) 65.9% Primary Balance (% of GDP) (Caribbean Development Bank) 1.0% Interest to Revenue Ratio (Gov’t Budget Estimates) 15%

Social Unemployment Rate (CSO) 18.3%

Unemployment (female) 18.9% Unemployment (male) 14.9% Poverty Rate (National Development Plan) 2016 25.1% Poverty Rate (female) 2016 54% Poverty Rate (male) 2016 46% Poverty Rate (children, 2016) 34.5% Number of school-going children (2017) 32,002

Note: All data is for 2019, unless otherwise stated. Poverty line of $6,443.0 (USD5.50 per day) Number of school going children is calculated from the UNICEF Situation Analysis of Children in Saint Lucia 2017 and broken down as follows: pre-school (3.342), primary (15,799), secondary (12,861)

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EXECUTIVESUMMARY Prior to the COVID-19 outbreak, the Saint Lucian between -11% and -17% in 2020, depending on economy was projected to continue along its how quickly the tourism industry recovers. As a growth path that has been ongoing since 2016. The result, around one-third of the labour force is economy was forecasted to grow at around 3.2% in projected to be unemployed. Under these 2020, building on the 4 previous years of growth. scenarios, fiscal revenues will contract by between This growth was to be driven by the largest 37% and 46% and, with limited fiscal space and economic sector, services, more specifically the minimal options for redirecting expenditures, tourism industry, which is broadly responsible for national debt could increase to the equivalent of 65% of output. The tourism sector accounted for 80% of GDP. 50.8% of total employment in 2018. To mitigate the possible impacts of the pandemic, While unemployment has been on a downward Saint Lucia used a three phased approach: health, trend, nearly one in every five people remained out social stabilisation and economic recovery, detailed of work in 2019, with females (18.9%) more likely to in the body of the report. It's social and economic be unemployed than males (14.9%). Gender relief programme was launched on April 29th and inequity in employment is also reflected in the wage included temporary income support of between gap that places women’s average monthly wage at $500 and $1,500 per month through the National about 22%1 less than their male counterparts with Insurance Corporation (NIC) for contributors and women overrepresented in the lower income non-NIC contributors for an initial period of three paying sectors of the economy. There is also the months and set to expire in July; a moratorium on issue of occupational segregation that finds women bank mortgage repayments (principal and overrepresented in the services sector which is interest) for both individuals and entities for a characterised by lower wages and salaries. period of six months through September; suspension of all rent payments for six months for Child poverty is estimated at 34.5% of the child those occupying government-owned commercial population compared to 21% for the adult units; provision of direct support to local population (2016) and 7.8% of the poor covered by indigenous farmers to sustain their livelihoods, social assistance.2 among others.

Saint Lucia managed to maintain a level of public As the potential for a global second wave increases debt below the regional average, with national and the return of tourism is likely to be protracted, indebtedness equivalent to 65.9% of GDP in 2019 this report makes a series of additional and the related interest payments absorbing recommendations to support the island’s social and around 15% of fiscal revenue. economic recovery, including the expansion of the agricultural extension services to provide Since confirming its first cases of COVID-19 March agricultural inputs to encourage self-production; 13th, the Saint Lucian Government implemented a the implementation and targeted delivery of a state of emergency, closed its borders and “family food basket” to provide support to the most instituted a series of curfews to contain the spread. vulnerable families; the expansion of the Disability These pragmatic actions were successful in Benefit to include adults and victims of sexual abuse containing the virus and ensuring that the health and gender-based violence; a strategy to designate impacts were arguably minimal with just 19 cases firms processing remittances as essential services; and no fatalities. and the expansion of home-schooling programmes to help address the gap in learning opportunities as Based on this economic shuttering and the academic recovery is an important imperative. expected slow recovery of the tourism industry, this report posits a possible range of GDP growth of

1 Author’s own estimate 6 2 Scaling up Social Assistance to Mitigate Secondary Impact of COVID-19 on Children, UNICEF, 2020 COVID-19 HEAT Series

CONTEXT

MACROECONOMY PRE-COVID-19

The agriculture sector contracted by 0.8% in 2019, Saint Lucia is a small upper middle income open following a recovery of 1.7% in 2018. Total banana economy, highly dependent on the services sector, exports to the UK and the Caribbean region especially tourism. It is an island economy highly declined by 19.8% partly due to the impact of vulnerable to external shocks (natural disasters; Tropical Storm Kirk in September 2018. The volatile tourism receipts; foreign oil prices; global construction sector contributed 3.7% to GDP in growth and demand). Saint Lucia’s GDP is 2019, reflecting a 0.3% contraction from 2018 due to comprised of 82.8% services (of which tourism, both private sector construction decline. Inflation was direct and indirect, contributes 65%), 14.2% 0.5% compared to 2.6% in 2018. Unemployment industrial sector and 2.9% agricultural sector (2017 stood at 18.3% in 2019 compared to 24.1% in 20156. estimates). The economy is therefore heavily dependent on the tourism sector for its growth. The The IMF in its 2019 Article IV consultation report economy experienced a combined 8% growth projected that, “the commencement of large public between 2016-2019, though following a slower infrastructure projects, including the trajectory from 2.6% in 2018 to 1.7% in 20193. GDP redevelopment of the international airport and a growth in 2019 resulted from expansions in tourism, comprehensive road improvement programme, is manufacturing and transport which overshadowed expected to substantially boost growth in 2020-22” declines in wholesale & retail, construction and even as it “will push up public debt and weaken the agriculture4. external position.” The Fund did identify the downside risks to such a positive outlook to include Like many of its regional neighbours, Saint Lucia’s “a deeper-than-expected slowdown in major source main source markets are the US, UK, Caribbean and markets for tourism, energy price shocks, Canada and these accounted for a 7.3% rise in stay- disruptions to global financial markets and loss of over arrivals in 2019, after growing for a seventh correspondent bank relationships.”Saint Lucia’s high consecutive year. Following double digit growth in vulnerability to natural disasters constitutes an ever- the previous two years, cruise arrivals grew by 2.5 % present risk to both growth and the fiscal outlook7. in 2019 while yacht arrivals were 4.6% higher With the onslaught of COVID-19 globally, UN ECLAC relative to 2018. Increased activity in the in early April 2020 projected real GDP growth in manufacturing sector led to growth of 8.6% in value Saint Lucia to fall to -8.1% in 2020 and the IMF added from the sector. Manufacturing contribution (-8.5%) compared to the 3.2% growth projection for to real GDP increased from 3.2% in 2018 to 3.4% in Saint Lucia prior to COVID-19 (UN ECLAC). 20195.

3 Saint Lucia’s National Budget Statement 2019-20 4 Economic and Social Review 2019, Caribbean Development Bank 5 Economic and Social Review 2019, Caribbean Development Bank 6 Economic and Social Review 2019, Caribbean Development Bank 7 7 IMF Article IV Consultation 2019 COVID-19 HEAT Series

FISCAL PRE-COVID-19

According to the 2019 Economic and Social Review, disasters and the lumpy expenditure associated with Saint Lucia’s debt to GDP ratio fell from 67.7% in 2015 infrastructure investment, and should be part of a to 59.6% in 2019, reflecting a continued expansion in broader fiscal responsibility framework that embeds the GDP base and the island’s capacity to carry the appropriate institutional and governance debt burden, rather than a decrease in the nominal arrangements to ensure both the appropriate degree value of the country’s indebtedness. As presented in of flexibility as well as enforceability of the fiscal rule. its Economic and Social Review 2019, public finances It would also be used to strike the balance between deteriorated in fiscal year 2019/20 as the central credibly meeting the debt target over the medium- government recorded a larger overall fiscal deficit of term and providing space for much-needed spending ECD193.8mn (3.5% of GDP) compared to ECD 57.3mn to build resilience10. (1.0% of GDP) in the previous year. This was due primarily to continued growth in total expenditure, The Government of Saint Lucia, like others in the reflecting both higher capital and current spending. Eastern Caribbean, has implemented a Citizenship- by-Investment Programme (CIP). It uses the funds Revenue intake also fell relative to 2018/19, owing to raised through this programme to finance a mix of comparatively lower receipts in the last two months current expenditures, capital projects (including post- of the fiscal year in light of the COVID-19 crisis. Asa disaster reconstruction), and debt reduction. CIP result, the primary balance moved from a surplus of raised some ECD 62mn in the 2018-19 reporting year, ECD108.4mn in 2018/19 to a deficit of ECD 23.0mn, more than double the ECD 28mn it garnered the year the first primary deficit since 2013/14. Similarly, the before. China was the leading source-country for new current account balance narrowed to a surplus of citizens, accounting for 21% of the total, followed by ECD 46.1mn in 2019/20, compared to ECD 103.4mn in Russia (9%), and Syria (8%). Saint Lucia released its the previous year. As a result, Saint Lucia’s total official Citizenship-by-Investment(Amendment) Regulations, public debt stock continued to trend upwards8. 2020, reducing the investment amounts under the Programme’s National Economic Fund option from Total revenue in 2019 was estimated at approximately USD 200,000 to USD 100,000 and implemented a 24% of the country’s GDP while total expenditure was “Limited Time Offer” under its government bonds estimated at 27.5% of GDP resulting in a fiscal deficit option. This has been dubbed a “COVID-19 Offer”. of 3.5% of GDP. The fiscal deficit as a percentage of These programmes have macroeconomic and fiscal total government revenue amounted to 15%. The effects that in some ways resemble exports of natural main sources of revenue as a percentage of total resources. They generate potentially large inflows of revenue were: taxes on goods and services 31%, revenue for governments, but these are generally corporate and personal taxes 22% and import duties unpredictable and volatile. Management of 22%. The major share of the national expenditure was Citizenship-By-Investment revenue therefore needs allocated to wages and salaries 45%, goods and to be incorporated into a country’s fiscal services 16% and transfers 10%, interest charges on responsibility framework. it should be noted that with debt 15%, principal repayment 10% and capital the introduction of the National Economic Fund, expenditure 19%. Increased liquidity in the Government cannot programme against CIP receipts commercial banking system contributed to a but rather must request approval from board of the reduction in the weighted average cost of debt which National Economic Fund. fell from 5.32% in 2018 to 5.16% in 2019. The country’s interest to revenue ratio stands at 15%9.

Pre-COVID-19, the IMF advised Saint Lucia to introduce a fiscal rule that would help anchor fiscal policy over the medium term and support consolidation efforts. To be effective, the fiscal rule should encompass a comprehensive definition of fiscal activities, including the fiscal costs of natural

8 Variables calculated using data from National Estimates of Revenue and Expenditure (2018/19) 9 Variables calculated using data from National Estimates of Revenue and Expenditure (2018/19) 8 10 IMF 2019 Article IV Consultation COVID-19 HEAT Series

MONETARY PRE-COVID-19

At the end of 2019, Saint Lucia’s imputed share of increases – 66% of children living in households with four reserves at the ECCB fell by 8% to ECD 682.7mn, or more children are expected to be poor. Further, an equivalent to 5.1 months of goods imports. Although analysis of child well-being in the Health and Nutrition there was a reduction in the weighted average Dimension by UNICEF revealed that approximately 5% of lending rate, business credit continued to decline. Saint Lucian children were undernourished in 201512. Deposits continued to rise and contributed to increased commercial bank liquidity as evidenced by According to UNICEF (2019), there were around 28,700 a decrease in the loans to deposit ratio to 78.3% at the adolescents13 in Saint Lucia in 2016 accounting for 17% of end of 2019 compared to 80.7% in 2018. the total population with one in three being poor (about 9,500). The adolescent poverty rate was 33%, significantly Poverty higher than the poverty rates for the older population (20+ years) at 21% and the population as a whole at Over the ten-year period 2006-2016, the poverty rate 25.1%. Further, a third of adolescents are not in education, moved from close to one in three to one in four. The employment or training (NEET) programmes, with the Enhanced Country Poverty Assessment (ECPA (2016) great majority of those over the school age being which incorporates multi-dimensional poverty unemployed14. Around one third of households in Saint assessment, defines the poor as persons living below Lucia contain adolescents and every house with the 2016 annualised poverty line of ECD 6,443.00. adolescents has an average of 1.5 adolescents. This amounts to approximately 43,000 Saint Lucians. Adolescents living in rural areas have a slightly higher This equates to below the Consumption-based poverty rate (35%) than those residing in urban areas poverty rates, defined as the proportion of (32%). However, since about three quarters live in urban individuals with household-level per-capita areas, the majority of poor adolescents (almost 72%) are consumption lower than the international poverty also urban residents. Thus, adolescent poverty line (USD 5.5 a day in 2011 PPP). The indigence line interventions should target adolescents in urban areas. was ECD 2,123 in 2016. The ECPA (2016) also reveals Indigence (severe poverty) among adolescents in Saint increasing urban poverty due to rural urban Lucia is low. In 2016, there were no more than 508 migration, with poverty concentrated amongst single indigent adolescents, representing an indigence rate of female households with children under 5 years. 1.8%15.

Levels of poverty and indigence are very similar Employment among women and men – 23% of women and 25% of men were considered poor, though their experiences Overall, the level of employment in Saint Lucia is 83.7% of are different. In fact, even though more women attain the average labour force (2008-2019) of 83,977. Of this secondary level education, greater proportions of 39,153 (47.6%) are women (Table 1). Further, female females rather than males end up being the heads of workers predominate in Human Health and Social Work poor households. (78%), Education (73%), Wholesale and Retail (59%) and Accommodation and Food Services (57.4%) (Table 1). According to UNICEF, in 2016, more than one in every three children was poor (16,800 children)11, with this rate much higher in rural communities than in urban areas in 2015. The rate of child poverty was nearly doubled as the number of children in the household

11 The Socio-Economic impact of COVID-19 on children and young people in the Eastern Caribbean Area April 2020 UNICEF 12 Mapping Of Child Well-Being in Saint Lucia Published by UNICEF Office for the Eastern Caribbean Area 2015 13 Adolescents, defined in the UNICEF Report Adolescent Well-being and Equity in Saint Lucia January 2019 as“persons in the10–19age group, include a number of distinct sub-groups: children and adults, persons in primary and secondary school, pre- and post-pubescent children, individuals inside and outside the labour force and individuals under and over the legal age of sexual consent” 14 UNICEF Adolescent Well-being and Equity in Saint Lucia January 2019 9 15 UNICEF Adolescent Well-being and Equity in Saint Lucia January 2019 COVID-19 HEAT Series

Table 1: Employment by Major Sector/Gender

Total Female % Females Sector Employed Employed Employed

Labour Force 83,977 39,153 47.6%

Agriculture 8,187 1,171 38.4% Manufacturing 4,261 2,083 48.0%

Construction 6,726 69 0.0%

Wholesale+Retail Trade, Repair of 13,439 7,912 Motor Vehicle and Motorcycle 59.0%

Accommodation + Food Services 14,000 8,037 57.4% Public Administration 7,387 3,760 51.0% Education 3,874 2,823 73.0% Health and Social Work 3,104 2,427 78.0%

Administration + Support Services 5,338 2,559 48.0%

Author Compilation based on LF by Industry Group and Sex 2008-2019

According to the Labour Force Survey in the economy has the potential to be the key driver of second quarter of 2019, the overall poverty reduction. Of course, the issue of introducing unemployment rate fell to 16.83%16 from 20.2% in a minimum wage could be considered. Both these 2018. This represents a total of 16,994 sectors are vulnerable to terms of trade shifts and unemployed persons in 2019. Contributing to extreme weather events, suggesting that the poor these results were the reduction in the labour and vulnerable population would be force along with increased employment in some disproportionately affected by the same factors. key sectors in the economy. The unemployment COVID-19 will create a similar impact and is therefore rate for both males and females improved in 2019. likely to impact these groups most significantly. Male unemployment decreased from 18.5% in 2018 to 14.9% in 2019 while female unemployment dropped by 3.2 percentage points to 18.9% in 2019, thus widening the Youth Unemployment unemployment gender gap to 4.0 percentage points in 2019, from 3.6 percentage points in 2018. Youth unemployment was 31.6% in the second 17 On the basis of these rates, in 2019, the number of quarter of 2019 , representing a total of 8,453 unemployed men was 7,884 and the number of persons, the lowest ever recorded level. Youth unemployed women 9,074. The labour force employment by gender reveals a male youth participation rate is estimated to have inched unemployment rate of 40.14% compared to a female downwards, from 71.4% in 2018 to 71.0% in 2019, unemployment rate of 28.7%. In 2019 there were its lowest level since 2013. The participation of therefore 5,326 male youth unemployed compared 18 females in the labour force grew by 2.6% to 67% to 3,127 female youth unemployed . Skills mismatch (48,304 participants) in 2019. is a major problem in Saint Lucia. While 44% of job openings require tertiary education, only 7% of job The agricultural sector employs most of the poor seekers have been to university. More than half of job (this is corroborated by the discussion of the seekers have not completed secondary education informal sector later in this analysis) while Tourism, but 75% of job openings require secondary because of significant economic role in the education as a minimum.

16 There appears to be differing estimations of the unemployment rate for 2019. While the CSO puts it at 18.3% the country’s Economic and Social Review puts it at 16.8. for the purpose of this analysis we use the CSO figure 17 CSO Labour Force Survey 2019 10 18 Saint Lucia Labour Force Survey 2019 COVID-19 HEAT Series

According to UNICEF19, adolescents (15–17-year- from data drawn from National estimates of olds) have a very low labour force participation rate expenditure). On average 14.1% of the total (LFPR) (13%) due to the great majority being in national expenditure was accounted for by school, while adolescents (18–19-year-olds) have a education expenditures 2012-2017. However, this much higher level of participation (62%). The was reduced annually from 14.4% (2012) to 12.7% combined participation for the 15–19 age group is (2017) of national expenditure. Education as a 33%, 80% of whom are unemployed. Males are percentage of GDP averaged 4.8%. Social Services more likely to be in a NEET than females, 38% expenditure averaged 4.8% of Saint Lucia’s total compared to 28%, which again results from the national expenditure and averaged 1.7% of the higher proportion of women who are studying. GDP21. Government of Saint Lucia provides a total of These gender differentials have important policy 2,589 households with Public Assistance Cash implications. These rates are over 50% higher than Transfer and allocates on average ECD 32mn for 20–24-year-olds and over five times the rate for towards Social Protection (Social Assistance, Social older age groups. These high levels imply that many Care, ALMP and Public Works). adolescents are finding it difficult to secure employment. Adolescents, despite comprising Social Protection Delivery Mechanisms around 4% of the total labour force, account for 15% of the total number of unemployed. Adolescents At the policy level, Saint Lucia is committed to the with no previous job experience have to compete eradication of poverty and expanding its social with a very large number of older, experienced protection programmes to meet the needs of at risk unemployed workers. This adds to the difficulties population. There are a number of social safety net they face as they transition to adulthood. Almost programmes, though there is limited coordination 60% of adolescents live with one biological parent and rationalisation across them. While the (mostly mothers). unavailability of data makes robust, disaggregated analysis of poverty and social sector measures in Gender Wage Disparity Saint Lucia difficult, available data suggests that coverage of target groups is low for Public UN Women conducted an analysis of earnings data Assistance, student support schemes and as part of its Saint Lucia Study in which results from programmes for vulnerable infants and young the 2012 Labour Force Survey and the 2005–2006 children. The Saint Lucia Social Development Fund Survey of Living Conditions were analysed. They (SSDF) accounts for the largest share of social found that women tended to earn less than men assistance spending, Public Assistance 11%, and across a range of different comparisons – student welfare assistance and school feeding take occupation, industry, status in employment and up less than 5%22. educational achievement. Ultimately, the study concluded that women in Saint Lucia were paid, on In 2014 the Government of Saint Lucia approved average, 10% less than their male peers20. Based on the country’s first National Social Protection Policy more recent data, we calculate the gender wage to guide the development of a framework, which differential later in the paper. UN Women also found promotes equity and enhances the well-being and education to be the wage equaliser, although it has capacity of poor and vulnerable households and still been insufficient to secure wage parity. populations in Saint Lucia to protect their consumption; invest in their future and contribute Social Expenditure meaningfully to national sustainable development. It proposed a reform process and an effort to The state of a country’s Social Sector is partially rationalise the existing interventions by merging, reflected in the portion of its national expenditure expanding or reducing them, based on their allocated to Health, Education and Social Services. objectives vis-à-vis the actual needs of the Over the period 2012-2017, the portion of the total population and the capacities of the implementing national expenditure accounted for by health agencies and institutions. showed some volatility but remained near 10% throughout the period and 2.5% of GDP (calculated

19 UNICEF Adolescent Well-being and Equity in Saint Lucia January 2019 20 J. Xavier: Final report: Gender aware beneficiary analysis of Saint Lucia’s Public Assistance Programme (Barbados: UN Women, 2015). 21 These percentage allocations were calculated from National Estimates of Expenditure data. 11 22 Saint Lucia Voluntary National Review Report on the implementation of the 2030 Agenda for Sustainable Development, July 2019 COVID-19 HEAT Series

This process is ongoing and is intended to improve Health targeting, efficiency and effectiveness of national social protection interventions, which currently In 2019 Saint Lucia had two public hospitals, St. Jude’s comprise a number of discrete systems. Chief among Hospital and Victoria Hospital, with the latter being these is the Public Assistance Programme (PAP), the largest. In March 2020, the GoSL transitioned to through which qualifying households receive a the Owen King European Union (OKEU) Hospital monthly cash allowance and the Child Disability Grant (a project financed by the European Union) from the of ECD 200 per child with severe disabilities. Victoria Hospital, using the latter as its COVID-19 qualifying applicants can receive both. This respiratory facility. There are also district hospitals at programme is critical to those it reaches, providing Vieux Fort, Dennery, Gros-Islet and Soufriere that basic income support for those living in poverty. offer primary health care services and limited Nonetheless, the programme has significant secondary care and emergency services. There are challenges, including weaknesses in the targeting also more than 30 health centres. Saint Lucia has one mechanism – the National Eligibility Test 2.0 (SL-NET privately run hospital and a number of other private 2.0) – and low levels of coverage23. The SL-NET Verions facilities that provide specialised medical and dental 3.0 is approved by Cabinet and will be implemented services. Saint Lucia imports all of its pharmaceutical shortly. requirements. The government imports pharmaceuticals through the Pool Procurement Saint Lucia is the recipient of the UN SDG Joint Fund Service of the Organisation of Eastern Caribbean geared at strengthening the social protection system States (PPS/OECS) enabling it to maximise the value towards making it more shock response. Additionally of health care services to Saint Lucians through the Saint Lucia recently received a World Bank loan of USD advantages of buying in bulk collectively, along with 20.0mn (Human Capital Resilience Project) geared at neighboring countries. Saint Lucia’s small TVET and Strengthening the Social Protection System pharmaceutical industry is regulated in part by the in Saint Lucia including dealing with the under Pharmacy Council of Saint Lucia. coverage of indigent on PAP by increasing PAP by 1,000 households. This initiative is being fast tracked as part of the COVID-19 response with funding from the UN-India Fund and World Food Programme funds. In 2018 the World Bank approved a USD 20mn facility from the International Development Association for The National Insurance Scheme (NIS) provides strengthening Saint Lucia’s public health care system retirement, disability, maternity, workers’ injury, and by improving accessibility, efficiency and survivors’ benefits to subscribers and provides responsiveness of key health services towards benefits to a small percentage of self-employed, universal health coverage by improving service seasonal, domestic, or informal sector workers. There delivery, upgrading health infrastructure and scaling is, however, no unemployment insurance and, given up preparedness and response for public health the high number of informal workers, the extent of emergencies. The project aims to ensure that at least coverage, particularly for the most vulnerable, is 100,000 people on the island of 178,000 inhabitants constrained. are registered to the National Health Scheme by the end of the project. It also ensures that at least 60% of Additionally, the Education Assistance Programme diabetic and hypertensive patients over 18 years old delivers educational services and support to poor are treated according to national protocols in public families through a Book Bursary Programme and a primary health care facilities. In addition, primary School Feeding Programme at infant and primary health care centers will be equipped to serve as the schools while the Housing Assistance Programme by first point of detection for selected infectious SSDF provides assistance to needy and indigent diseases. individuals (especially the elderly and households with children) and the Basic Needs Trust Fund (BNTF) Universal non-contributory pharmaceutical programme. supports housing and construction of community- The Ministry of Health and Wellness has the primary based retail facilities, respectively. objective to facilitate implementation, and by so doing provide free pharmaceuticals to all diabetics Koudmein Ste Lucie which is a holistic intervention and all diabetics with hypertension, irrespective of programme modelled after the Chilean Puente income. programme, is designed to give psycho-social support to families living in extreme poverty.

23 Case Study on the St. Lucia National Eligibility Test, UNICEF, UN Women, 2015 12 COVID-19 HEAT Series

Education and Access to Learning The Informal Economy

The 1997 Saint Lucia Education Act requires all Based on the most recent data25, 27.3% of the labour students to remain in school until 16 years of age; the force is informally employed26 and these workers are Universal Secondary School Act (2006/7) assures every responsible for generating as much as 8% to GDP. student a secondary school placement where they These informal jobs are dominated by small farmers complete five years of basic studies (Forms 1-5). In and those involved in service and craft occupations. addition to the traditional secondary school These workers are highly vulnerable to shocks, as programme, Saint Lucia provides vocational education more than 80% of the related businesses are through a three-year Senior Primary Programme or unregistered and 3/4 keep no records, making it through the Centre for Adolescent Renewal and difficult for them integrate into and benefit from Education CARE School, both focus on preparing formal social support systems such as the NIS. students for future technical jobs.

In the event of a second wave, a sustained transition to online learning will be challenging, as nearly half of the Initial Policy Response to COVID-19 population does not have access to the internet.24 Given what is known about the geographic Saint Lucia approached the COVID-19 response with a distribution of poverty in Saint Lucia, in the absence of three pronged triaged approach, starting with Public disaggregated internet access data, it is reasonable to Health Response which included strengthening the conclude that most of those without access are in rural Public Health System (Quarantine and Isolation areas and are primarily the poorest households, facilities, PPE, ventilators), border closures, curfews, putting this group at a particular disadvantage for state of emergency and school closures. Phase 2 was accessing remote and virtual learning. the Social Stabilisation Plan which featured income support (Economic Relief Programme) by the National Remittances Insurance Corporation (NIC) for contributors and the Central Government launched an Income Support Remittances sent by the diaspora provide income for Programme for non-NIC contributors of ECD 500 many Saint Lucian households and contribute to monthly for 3 months (April to June 2020). Phase 3 reducing poverty. As in most small states, limited job included the Economic Recovery and Resilience Plan opportunities and vulnerability to natural disasters are geared at providing support to the business sector a push factor for emigration. OECS emigration rates are through credit and liquidity support as well as among the highest in the world, with most of the supporting poor and vulnerable households. Saint diaspora located in the United States, Canada, and Lucia also secured the IMF Rapid Credit Facility Europe, countries hard hit by COVID-19. In 2018 USD 29mn among others to support its COVID-19 remittances to Saint Lucia were USD 42.9mn. Given this Response Initiatives. level of inflows, poverty rates would have been 5 percentage points higher in Saint Lucia if recipient Table 2 below describes the initiatives the Government households had not received remittances. Global of Saint Lucia outlined as its first response to remittances to low and middle-income countries are protecting livelihoods. Based on the costs provided for forecast to decline by 20% in 2020: a situation that some items in Table 2, the initial response increases would reduce inflows to Saint Lucia by aroundGovernment’s expenditure by ECD 88.8mn (Cash USD 8mn and put further stress on local recipients, at a transfers) and reduces revenue by at least ECD 20.9mn. time when their dependence on these funds will be Note: some items, for example, rental waivers, are not increased. quantified and deferral of revenues for items such as individual and corporate taxes are also not quantified.

24 UNDP Human Development Reports Indicator Database 25 Saint Lucia Central Statistical Office Measurement of Informal Sector and Informal Employment in St. Lucia, 2009 13 26 Informal employment is defined as employees who have no written contract and do not have a pay slip COVID-19 HEAT Series

Table 2: Initial Policy Response to COVID-19 Classification Beneficiary Amount Period Cost Initiative (EC$) (EC$) 500-1500 April- June Cash Transfer Unemployment Subsistence NIC* contributors 65mn Allowance monthly 3-months 16.8mn Employment Subsistence Self-employed* non-NIC 500 Allowance contributors

Extension to file Corporate tax Registered Business 1-month Fiscal Extension to individual tax return Individuals 1-month Waiver of interest/penalties on taxes Businesses/Individuals 3-months Tax Credit to Companies retaining 30% staff Businesses 30% Moratorium on bank loans interest/principal Businesses/Individuals Duty free barrel concession 4mn

Concessions for production of health and Businesses 5mn sanitation products Rent waiver for MSMEs renting from Gov’t MSMEs 6-months Utility Assistance Service at cost/no disconnections April - Sep Fuel Rebate Bus Drivers 1.1mn

Gov’t Assistance to produce hand Local Enterprises 7.4mn sanitisers, liquid soap and rubbing alcohol Government Support Manufacturers of household cleaning items 3.4mn Bulk purchase of flu related medicines for distribution at low cost Individuals Distribution of meals Underprivileged Relief from Moratorium on public debt repayment, grant funding, policy based loans and budgetary Funding Partners support from Development Partners/regional and multilateral institutions Total 102.7mn *NIC National Insurance Corporation *Self-employed (taxi-drivers ,vendors, MSMEs, creative industry) Source: Information used to construct this table was provided by Gov’t of Saint Lucia

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CHANNELOFIMPACT EXTERNAL DOMESTIC

Saint Lucia is largely a tourism dependent economy. The domestic channels of impact to the economy Tourism is dependent on growth in the global are centered on the mandatory shut down and economy, in particular source markets from which restricted movement of people caused by COVID-19. its tourists come. Global growth projected at 3.3% This, of course, directly impacts employment, pre-COVID-19 is now projected at -4.9% in June business activity, purchasing power, demand 2020, 1.9 percentage points below the April 2020 patterns in the short term and is expected to have IMF World Economic Outlook (WEO) forecast. The drag on impact depending on the rate of recovery. COVID-19 pandemic has had a more negative Emerging from the transition stage, if many impact on activity in the first half of 2020 than households and/or firms are bankrupt and if there is anticipated, and the recovery is projected to be a second wave, then the recovery is likely to be more gradual than previously forecasted. WEO prolonged and slow. Already many businesses are projects a 5.4% global growth in 2021. facing a liquidity crisis which has the potential of evolving into an insolvency crisis The major source markets for Saint Lucia are projected to also contract significantly. According to Government’s fiscal operation is also a domestic the IMF (June 2020), the United States (Saint Lucia’s channel through which the impact is felt: loss of leading source market, accounting for 45% of the revenue sources; increased borrowing to address total stay-over arrivals in 2019) projected GDP for health and income needs; budgetary reallocations; 2020 is -8% which is 2.1% lower than its projection draw downs on savings and stimulus financing are in April 2020; UK (accounting for 19.7% of total stay- but some of the areas impacted. The economy of over arrivals) is now projected to contract to -10.2% Saint Lucia was subjected to a complete shut-down and in the Caribbean, tourism dependent save for essential services with an imposed curfew economies are projected to contract to -10.3%. from April 1st. Partial and phased opening commenced at the end of April and by the end of The performance of the Tourism sector will also May the domestic economy was re-opened, with depend on the following: international cooperation the nightly curfew still in force. Phase 4 which on travel rules and sanitary protocols; the speed commenced in early June allowed for the opening with which source markets control the virus; the of borders to essential and approved services and internal reopening of source markets to put persons saw the launch of a large stimulus to the private back to work; the speed with which source markets sector and economy. Phase 5 which was fully open their borders for citizens to leave on vacation implemented in mid-July saw the full opening of and business travel; travel costs and the rate at borders to tourism with the required health which travelers choose to re-engage with protocols in place. Noteworthy, the transition from international travel. UN ECLAC projects Tourism in one phase to the next was premised on the the Caribbean to contract by 30% therefore realisation of pre-set health and safety targets impacting GDP negatively by 2.5%27. related to COVID-1928.

World Trade is also forecasted to decline by 11%, growing again by 8.4% in 2021 (IMF). The global GDP loss is estimated at USD 9bn, this is as a consequence of contracting global demand as economies lock down in order to contain COVID-19 spread. UN ECLAC estimates the Caribbean region’s exports to contract by 15% and face reduced prices for exports averaging 8%.

27 UN ECLAC Special Report COVID-19 28 Government of Saint Lucia official schedule 15 COVID-19 HEAT Series

IMPACT ANALYSIS

MACRO IMPACT

In examining the impact of COVID-19 on GDP, we For tourism reliant economies the uncertainty is even employ the World Tourism Organisation 3-scenario stronger as the following factors which affect travel are model based on projected reduction in tourist arrivals yet unknown and difficult to model: increased fear of travelling in the confines of an airplane, the additional under different reopening schedules of the economy’s cost of health measures and social distancing international borders and lifting of trade restrictions. requirement on airports, airlines, hotels and government We then make reasoned assumptions with respect to institutions with the concomitant impact on the cost of contractions in the other productive sectors. These are travel and travel insurance, airline closures and impact on outlined in the Appendix. travel routes and costs, global employment and income impact of COVID-19 on tourists, the cruise ship industry In 2019, the economy of Saint Lucia grew by 1.7% and response given the high incidence of positive cases was projected to grow by to 3.2% in 2020 (UN ECLAC). reported on ships, the price of fuel, the speed with which Early in April, the UN ECLAC revised the post-COVID-19 a vaccine comes on market and cost and availability of GDP growth in Saint Lucia to -8.1%, with a slightly the vaccine. higher contraction projection by the IMF of -8.5%. Economic modeling is time sensitive. In early March the Global recovery ultimately depends on the rate at which assumptions with respect to domestic shuts downs, COVID-19 is contained and the availability of a vaccine, global demand contractions etc. would have been but also heavily on the capacity of governments and international funding agencies to finance a global more conservative than 2 months later given the recovery and stimulus package never before evolution of the COVID-19 impact on world economies. implemented. How this is distributed will affect the pattern of recovery to positive growth, noting that small In our model, the best-case scenario results in a vulnerable island economies don’t have the fiscal space contracted GDP rate of -11% and a worst case -17% in or economic weight to replicate the massive expenditure 2020. The associated contraction in employment has packages of the developed nations. The possibility of a also been estimated to be -11% best case and -18% global second wave has become increasingly likely and worst case. (Table 3 below). such an outcome would further depress growth and employment beyond current forecasts. Table3:Post-COVID-19GDPScenarioProjections2020 The Monetary Unit of the Eastern Caribbean Central Bank Scenario 1: Scenario 2: Scenario 3: (ECCU) of which Saint Lucia is a member, has set a ceiling (-58% reduction in (-70% reduction in (-78% reduction in arrivals) arrivals) arrivals) target for each country’s debt to GDP ratio at 60% by based on the gradual based on the gradual based on the gradual opening of international opening of international opening of international 2030. Pre-COVID-19, Saint Lucia’s was well within this borders and easing of borders and easing of borders and easing of travel restrictions in early travel restrictions in early travel restrictions in early range at 59.6% in 2019. The Saint Lucian Government’s July September December Medium-Term Development Strategy (2020-2023) Impact On articulated an accelerated tourism growth plan which GDP was projected to increase GDP by 1.9% by 2020, attract Growth(%) -11% -14% -17% USD 3.5 bn in investments and create 4,000 jobs by 2022. These large public infrastructure projects, including the Employ- -11% -15% -18% ment (%) redevelopment of the international airport and a comprehensive road improvement programme (12.7% of GDP), were expected to substantially boost growth 2020-22 It should be noted that the majority of WTO experts expect but would have pushed public debt up to 74% by 2023 to see signs of recovery by the final quarter of 2020 but and weaken the external position. In addition, a mostly in 2021 based on previous crises, which resulted in USD 20mn loan has been secured from the World Bank to quick recovery of leisure travel, particularly travel for finance the country’s health sector infrastructural visiting friends and relatives rather than business travel. upgrade and the design and implementation of a However, previous crises were not health related, which National Health Insurance Scheme. The latter is still at the makes forecasting very challenging. This pandemic by all conceptualisation stage. Of course, the impact of accounts is the worst global disaster since WWII and the COVID-19, even without this additional CAPEX may worsen the country’s debt to GDP ratio as GDP contracts. great depression of the 1930’s, and is expected to be worse The IMF Rapid Credit Facility USD 29mn among others given the interconnectedness and inter-dependence of the may help to mitigate this impact. world facilitated through globalisation.

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Table4:RevisedGDP/DebttoGDP/Unemployment Scenario 1: Scenario 2: Scenario 3: (-58% reduction in arrivals) (-70% reduction in arrivals) (-78% reduction in arrivals) based on the gradual opening based on the gradual opening of based on the gradual opening of of international borders and international borders and easing international borders and easing easing of travel restrictions in of travel restrictions in early of travel restrictions in early early July September December Revised GDP (in $US Billions) $1.84 $1.78 $1.71 Table 4 Revised Debt to GDP Ratio (%) 74.1% 76.9%76.9% 79.8%

Revised Unemployment (%) 29.6% 32.2% 34.7%

Based on the growth contraction due to COVID-19 It should be noted that in the long term, with tourism projected in our model, the country’s existing debt to recovery, the airport project can support the GDP ratio under scenario 1 will increase to 74.1% and intended expansion of the country's cruise and the worst-case scenario will move it to 79.8% of GDP yachting industries. (Table 4 above). As a consequence of the growth impact caused by COVID-19, Saint Lucia’s debt to GDP Even on ready to go projects, it could seek to ratio will in 2020 exceed the rate that was projected in renegotiate better rates, longer moratoriums and 2023 pre-COVID-19, based on a massive capital lengthened repayment period, even though it is investment initiative aimed at accelerating growth. noted that most of the borrowing are project funding from Multi-lateral Development Banks at Given this reality and the uncertainties surrounding a concessionary terms. This augurs well for the quick tourism resurgence, the Government of Saint government’s debt strategy which seeks to move Lucia could rethink its investment strategy roll out. away from high interest market debt to The investment in the Health sector is essential as the concessionary development borrowing. country prepares for a potential COVID-19 second wave as well as future pandemics. This investment Further, it might consider focusing on projects that will provide improved health infrastructure and will support a diversification agenda to reduce the affordable access through the National Health country’s over-dependence on Tourism in the Insurance Scheme. This latter might also be fast medium to long term. A green and blue recovery tracked with cost and efficiency considerations approach as part of the recovery and as a means of guiding the process of design and implementation. diversifying the economy might be considered. Before COVID-19, consideration was already being The government is likely to look to its “financing given to mobilising donor grants to fund approved” package of infrastructural projects as a investments in climate resilience. This may be the part response to recovery and certainly to the growth best option available to the government at this time phase post-COVID. This can be viewed as its “fiscal as it minimises the impact on the country’s stimulus” to provide income relief in the short term indebtedness. while preparing for tourism recovery and long-term growth. Even before COVID-19 however, concerns were raised that without greater private sector investment into hotel expansions, the additional capacity from the new airport may remain underutilised, diluting the impact of this investment on long-run potential growth. This caution is even more pronounced at this time and it is uncertain whether pre-COVID-19 planned private sector investments will still take place. If these are now rescheduled or discontinued, government might need to reprioritise its planned CAPEX. By focusing on shovel ready projects as is the Government's intention, it might consider prioritising those directly linked to non-tourism revenue generation in the shortest possible time given the current realities.

17 2020 | UNDP, UNICEF & UN Women COVID-19 HEAT Series

FISCAL IMPACT

The scenario analysis conducted in this paper Given that 55% of government’s expenditure is on employed regression analysis to determine the wages and salaries and transfers, in the best-case relationship (direct and indirect) of tourist arrivals on scenario, these two line-items of expenditure alone the tax revenue of Saint Lucia in 2020 using World will consume 76% of government’s revised revenue. Bank data. The results show that for every additional Which means that government will only be left with tourist arrival, total government revenue increases by 14% of revenue which cannot fund other expenditure USD 509, holding population and employment items. Given the current crisis of job and income loss constant (see appendix for details). This was applied (discussed later), the government can hardly entertain to the 3 arrival scenario contractions assumed by the cutting its expenditure, especially since it is WTO with the respective dates for the gradual governments globally that must find the resources opening up of international borders and lifting of over and beyond recurrent spending for recovery and trade restrictions. stimulus of incomes, jobs and economy. The challenge for the Saint Lucian Government will be its The best-case scenario, based on a 58% reduction in capacity to find the additional 2.6% of GDP required Tourist arrivals and a gradual opening of international to maintain the projected 2020 expenditure plus the borders and easing of travel restrictions in early July resources to provide the additional expenditure will result in a 37% contraction of government’s needed in health, unemployment relief, social current revenue forecast from USD 443,042,889 to protection and business support necessitated by the USD 279,289,340. The second scenario of a 70% COVID-related impacts. contraction in tourist arrivals with gradual opening in early September, will result in revenue contracting by The interest to revenue ratio becomes an even more 42% and the worst case, a 78% contraction in tourist serious challenge. It was already high (15%) pre- arrivals with gradual opening in early December will COVID-19 even after intentional debt restructuring result in revenue decline of 46%. It is obvious that (refinancing, lengthening maturities, pay-offs, inevitable contractions in taxes from non-tourism negotiating better interest rates) over the previous sectors will further worsen this forecast (Table 5). two years. Our best-case scenario increases this rate to 24%. The silver lining is that 75% of government’s What does this mean for Government’s forecasted borrowings is in EC dollars thus minimising potential expenditure? This is outlined in Table 6. Firstly, even exchange rate risks. The Government of Saint Lucia prior to COVID-19, the government intended to run a has no fiscal space within its budget to maneuver. The current budget deficit as a percentage of GDP of 3.4%. government’s Citizenship-by-Investment programme Our best-case scenario will increase that deficit by realised growth in 2019, however as discussed earlier, 2.6% to 6% of GDP and the worst case will increase it even with a 50% discount, in the current to 10% of GDP. Interest to revenue ratio will also circumstance, the response has been poor. In essence worsen, moving from 15% to 24% in the best-case this is not likely to be a source of revenue to meet the scenario and28% in the worst case (Table 6). budgetary shortfall consequent upon COVID-19 and alternative sources will be required.

Table5:RevisedGDP/DebttoGDP/Unemployment 2020 Gov’t Revenue* Forecast ($US) Pre-COVID-19 Forecast Regression Model Scenarios Forecast % Change Scenario 1: (-58% reduction in arrivals) based on the gradual opening of 443,042,889 279,289,340 -37% international borders and easing of travel restrictions in early July Scenario 2: (-70% reduction in arrivals) based on the gradual opening of 443,042,889 255,141,496 -42% international borders and easing of travel restrictions in early September Scenario 3: (-78% reduction in arrivals) based on the gradual opening of -46% international borders and easing of 443,042,889 239,042,934 travel restrictions in early December *Current Gov’t Revenue Net Refunds

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Table 6: Revised Gov’t Revenue and Pre-COVID-19 Expenditure Estimates

Scenario 1: Scenario 2: Scenario 3: (-58% reduction in arrivals) (-70% reduction in arrivals) (-78% reduction in arrivals) 2020 Gov’t Revenue & based on the gradual based on the gradual based on the gradual Expenditure Forecasts opening of international opening of international opening of international borders and easing of travel borders and easing of travel borders and easing of travel restrictions in early July restrictions in early restrictions in early September December

Gov’t Current Revenue1 Forecasts: Revised Estimates2 ($US) 27,289,340 255,141,496 239,042,934 % Changes from pre-COVID-19 -37% -42% -46%

Gov’t Current Expenditure Forecasts: 386,647,940 386,647,940 386,647,940 Current Expenditure3 Estimates Interest Payment 67,132,912 67,132,912 67,132,912

Indicators: Current Deficit (107,358,600) (131,506,443) (147,605,005) GDP 2,074,000,000 2,074,000,000 2,074,000,000 Revised GDP4 1,844,823,000 1,777,418,000 1,712,087,000 Current Deficit as a % of Revised GDP -6% -7% -9% Interest to Revenue Ratio 24% 26% 28%

1 Gov’t Revenue Net Refunds 2 Author’s Estimates from Gov’t Revenue Regression Model 3 Wages, Salaries, Good & Services and Interest Payments 4 Author’s Estimates Based on GDP Growth Impact Model

SOCIAL IMPACT

Unemployment their jobs. Saint Lucia has no unemployment relief programme for persons unregistered with the NIC. Based on our scenario modeling, employment will In effect, it would cost the government ECD 44.8mn contract by 11% best case and 18% worst case. We to provide a 3-month stipend (ECD 500 per month) project a best-case unemployment of 29.6% and a for the total unemployed population. If we assume worst-case unemployment of 34.7% for 2020 (Table that the pre-COVID-19 unemployed was accessing 7). The best case will result in 29,889 persons support through other means, and that this unemployed. That’s an additional 11,410 persons. additional unemployment is temporary, the cost to This will primarily affect private sector workers and the government to provide temporary income relief especially those involved directly or indirectly in the to the additional 11,412 is ECD 17.1mn for 3 months. tourism sector as the situation of public sector Note, ECD 500 monthly stipend is less than the workers will be largely unaffected as they will retain monthly per capita poverty line of ECD 537.

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Table7:ScenarioContractionsinEmploymentandUnemploymentRate Scenario 1: Scenario 2: Scenario 3: (-58% reduction in arrivals) (-70% reduction in arrivals) (-78% reduction in arrivals) based on the gradual opening based on the gradual opening of based on the gradual opening of of international borders and international borders and easing international borders and easing easing of travel restrictions in of travel restrictions in early of travel restrictions in early early July September December Revised GDP (in $US Billions) $1.84 $1.78 $1.71 76.9% Revised Unemployment (%) 29.6% 32.2% 34.7%

Gender-Based Unemployment male unemployment from 14.9 pre-COVID-19 to 24% with a worst case contraction for women of Tables 8 and 9 below show the contraction that will 33.9% and males 29.7%. In effect female workers will take place in female versus male unemployment as a suffer the worst employment fallout asa consequence of our modelling assumptions. In our consequence of COVID-19. best case scenario, female unemployment will increase from 18.9% post-COVID-19 to 28.5% and

Table8:ContractioninFemaleUnemployment Scenario 1: Scenario 2: Scenario 3: (-58% reduction in arrivals) (-70% reduction in arrivals) (-78% reduction in arrivals) based on the gradual opening based on the gradual opening of based on the gradual opening of of international borders and international borders and easing international borders and easing easing of travel restrictions in of travel restrictions in early of travel restrictions in early early July September December Female Employment Contraction (%) -11.9% -15.2% -18.5% Revised Female Employment (%) 71.5% 76.9%68.8% 66.1% Revised Female Unemployment (%) 28.5% 31.2% 33.9%

Table9:ContractioninMaleUnemployment Scenario 1: Scenario 2: Scenario 3: (-58% reduction in arrivals) (-70% reduction in arrivals) (-78% reduction in arrivals) based on the gradual opening based on the gradual opening of based on the gradual opening of of international borders and international borders and easing international borders and easing easing of travel restrictions in of travel restrictions in early of travel restrictions in early early July September December Male Employment Contraction (%) -10.7% -14.1% -17.4% Revised Male Employment (%) 76.0% 76.9%73.1% 70.3% Revised Male Unemployment (%) 24.0% 26.9% 29.7%

2020 | UNDP, UNICEF & UN Women 20 COVID-19 HEAT Series

Incomes These businesses would have been subjected to full or partial closure for the months of April and May and as The economy of Saint Lucia was shut down (except for the economy reopens, low sales will be expected for essential services) with curfew for approximately 2 those with the capacity to reopen doors. Some will months (April-May2020). The economy opened to new close permanently. The 23,000 employed in the norms of social distancing and health protocols and a informal sector plus a significant portion of formal domestic consumer base that has suffered a serious service sector workers are not registered for or entitled income shock under lock down conditions. Further, to unemployment relief from the NIC and therefore until the tourism sector is fully operational, incomes have no access to an automatic security given the will be reduced either through loss of jobs, reduced likelihood of protracted unemployment. The number of working hours or same hours for less pay. government might consider conducting a robust Persons working in service industry businesses such as exercise to determine the real employment impact of restaurants, hotels, and other tourism-related COVID-19 as a basis for designing and implementing industries, the self-employed in the informal economy effective short-term interventions. (craft, retail, agro-processing and taxi-drivers), part- time and/or seasonal employees and the At the level of industry, the estimated 80% MSMEs underemployed will continue to be the hardest hit in would be facing severe liquidity constraints and in terms of income loss. need of liquidity support as most have no relations with lending institutions or the normal qualifying Quantifying the full scope of this contraction will only requirements to access same. In larger businesses, be possible once the pandemic has been brought employees would have been less at risk as they may under control globally and full national assessments have been subjected to work from home or part time are carried out. In the interim, we make reasoned work commensurate with salary cuts. They would also assumptions on which to draw some preliminary be part of the formal economy with employees conclusions on the impact of COVID-19 on vulnerable contributing to the NIC scheme and therefore entitled workers and in particular women. The latter is explored to unemployment relief. However, UN Women notes under“gender”below in more detail. that it is difficult to assess employer compliance inthe absence of research in this area. Cash transfers to all Table 10 gives a sectoral breakdown of employment. but the last category of employees and self- employed We estimate that tourism alone accounts for 50.8% of would therefore be critical. the 64.5% in the services sector. Employees in the Tourism sector are the hardest hit in terms of loss of In order to get a better understanding of the numbers jobs or cuts in income. In industry, over 80% of of vulnerable workers, we extracted from the Labour businesses are sole trading MSMEs, a large percentage Force Survey 2019 the employment numbers for those of which are unregistered and operating in the occupations that would fall into the lower income informal economy. 58% of informal enterprise brackets and therefore at greatest risk of slipping into operators are male and 42% female with the majority poverty (Table 11 below). of the enterprises being sole proprietors.

Table 10: Employment Contribution by Sectors (2018) Table 11: Labour Force Employment by Some Occupation 2018 % Contribution % Contribution to Employment to GDP* Services and Sales Workers 28%

Services 64.5% 82.8% Elementary Workers 16%

Industry 18.2% 14.2% Craft and Related Traders 8% Agriculture 17.3% 2.9% Clerical Support Workers 5% *Central Intelligence Agency (March 2018) Managers and Professionals 17%

Approximate Calculations from data in the Labour Force Survey 2019

2020 | UNDP, UNICEF & UN Women 21 COVID-19 HEAT Series

From Table 11, we estimate that 57% (47,867) of the Only 17% of the employed are managers and employed (given a total employed of 83,977) would professionals. In effect, 47,867 low income earners be working in low paying wage occupations, with the are vulnerable to loss of income and or jobs as a largest proportion 36% (30,231) in services and sales consequence of COVID-19. work and craft and related traders (occupations linked to the tourism industry).

Table 12: Income Shocks to Monthly Mean Household Income by Sex and Sector

Monthly mean Household Income Monthly Monthly 25%reduction Monthly 35% reduction Disaggregated by Sex and Sector Male Female Male Female Male Female Agriculture, Hunting and Forestry $1,758 $1,233 $1,319 $924 $1,143 $801

Manufacturing $2,021 $1,490 $1,516 $1,118 $1,314 $969

Construction $2,730 $1,809 $2,047 $1,357 $1,774 $1,176

Wholesale and Retail Trade $1,954 $1,434 $1,465 $1,076 $1,270 $932

Accommodation and Food Services $2,215 $1,853 $1,661 $1,390 $1,440 $1,205

Transport, Storage and Communication $2,479 $2,431 $1,860 $1,823 $1,612 $1,580 Other Services $2,046 $1,852 $1,535 $1,389 $1,330 $1,204 Public Administration and Defense $2,940 $2,695 $2,205 $2,021 $1,911 $1,752 Education Services - Gov’t/Private $3,061 $2,628 $2,296 $1,971 $1,990 $1,708 Activities not adequately defined $2,132 $2,237 $1,599 $1,745 $1,386 $1,512

Source: Survey of Living Conditions (2016)

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Table 12 shows the results of income shocks we apply Table13:Employment by Sectors/Gender and Youth Employment to monthly household income disaggregated by sex and sector. Even before COVID-19, with the exception 2019 Employment Data of males in Public Administration and Defense and Males Females Total Educational Services, both men and women in all Total Labour Force 55,039 45,937 100,976 other sectors earned an average monthly income Total Employed 46,838 37,255 84,093 below the current estimated living wage of Employment in Services 23,997 30,341 54,338 approximately ECD 2800. Given that monthly per Employment in Industry 12,608 2,660 15,269 capita poverty line is ECD 537, the income shocks Employment in Agriculture 10,233 4,253 14,487 push all categories of workers closer to poverty, Youth Employment 7,942 7,756 15,698 particularly women employed in agriculture and Vulnerable Employment 15,177 9,687 24,864 wholesale and retail. Youth defined as persons ages 15 to29 *Author’s Calculations of Data using labour Force estimation from the Saint Lucia Remittances also play an important role in easing the Government’s Economic and Social Review and World Bank’s estimates of % breakdown poverty burden in Saint Lucia as it accounts for approximately 10% of the average incomes of lower Women predominate in the services sector; 30,341 income households. This comes largely from the compared to 23,997 men (Table 13). An analysis of the diaspora located in the United States, Canada, and gender breakdown of the employed provided in Europe who are employed largely in the services Table 2 (average female employment by sectors 2008- sector hardest hit by COVID-19. The World Bank 2019) shows that of the total number of women expects remittances from these sources to contract employed (37,255), 30,341 or approximately 81.4% by 20%. In effect, such a contraction in remittances are employed in the services sectors and allocated as will push recipients further into poverty. follows in the various sub-sectors: Human Health and Social Work (78%), Education (73%), Wholesale and Gender Retail, Repair of Motor Vehicles and Motorcycles (59%), Accommodation and Food Services (57.4%), Female unemployment has systemically outstripped Public Administration (51%). male unemployment in Saint Lucia. In 2019 male unemployment was 14.9% compared to female There was an average of 15,949 women employed in unemployment at 18.9%. Gender inequity in Accommodation and Food Services and Wholesale employment is also reflected in the wage gap. Based and Retail alone over the period, with an additional on the Survey of Living Conditions data 2016 in Table 5,250 women employed in Education and Health and 12, in all sectors with the exception of “Activities not Social Services. Given that both the Health and adequately defined” women earn less than men. We Education sectors are state driven, it is reasonable to calculate the wage gaps in the following sectors to assume that in these sectors, workers would suffer be: Agriculture 30%, Manufacturing 26%, minimal income fallout and have access to formal Construction 34%, Wholesale and Retail 27%, support through the National Insurance Corporation. Accommodation and Food services 16% and However, there is a strong likelihood that most of the Education 14%. This translates into a national wage 15,949 women employed in the Accommodation and gap of approximately 22%. Gender inequality is Wholesale/Retail sectors who already earned 22% further accentuated when one considers that single less than their male counterparts, have no safety net female households with more than 4 children are in the face of unemployment due to the crisis. amongst the poorest. In the short term, the post- Government might consider targeting women in COVID-19 response must target women particularly these sectors for income support as they are at high in the sectors in which they predominate risk of falling into poverty. (Accommodation and Food Services and Wholesale and Retail) and in the medium to long term, the wage gap must be closed to address poverty reduction in Saint Lucia. Income support targeted at poor single mothers with more than 4 children will result in reducing child poverty.

2020 | UNDP, UNICEF & UN Women 23 COVID-19 HEAT Series

Poverty Education

Increases in unemployment will lead directly to Schools have been closed as a response to COVID-19 sharp reductions in household incomes and and will not be reopened until September, and then concomitant increases in poverty levels. Poverty will under strict social distancing with health protocols. also increase due to reductions in earnings for some This may mean reducing the numbers of student per of those who are able to retain their jobs due to class, which could mean running shift systems to reduced hours or pay cuts. The potential increase in accommodate this requirement. This is yet severe poverty due to the pandemic can be undecided. However, e-learning has become a pre- estimated using the IFPRI35 finding that severe requisite of the new norm in education. To this end poverty is likely to increase by 2% for every 1% access to computers and internet by school aged reduction in GDP29. Applied to the best case GDP children is a necessity. projection from our model of -11%, poverty in Saint Lucia would increase by 22%. This would move Saint Lucia’s poverty rate from the current 25.1% to 47.1%, an estimated 84,777 persons, almost half of the population. This would considerably exacerbate the issues of child and adult mental health problems and heightened risks of child abuse and domestic violence, due to increased tensions caused by poverty.

Diagram 1: Households with or without computers connected to Internet

Source: Government of Saint Lucia

29 Taken from UNICEF The socio-economic impact of COVID-19 on children and young people in the Eastern Caribbean Area April 2020 which notes“IFPRI, 2020, How much will global poverty increase because of COVID-19?, research blogpost: https://www.ifpri.org/blog/howmuch-will- global-poverty-increase-because-covid-19.” 24 COVID-19 HEAT Series

RECOMMENDATIONS

PRIORITISE SHOVEL READY SPENDING current COVID-19-related benefit of ECD 500 per month for a further 3 months to cover half of the Saint Lucia is not subject to any internal fiscal rules workers in these sectors would require but is likely to have to reimagine the phasing of its approximately ECD 84mn. A systematic approach to investment strategy, equivalent to 13% of GDP,which this is needed and the report recommends a rapid is to be financed by a combination of grant and debt assessment of the COVID-19 social protection resources. Government could prioritise, “shovel response to-date, including a review of its scale and ready” grant funded projects linked strongly to scope and an analysis of whether it has been revenue generation in the shortest possible time effective in reaching those most affected bythe given the current realities. These would include pandemic. construction and other capital works programmes that would stimulate growth and employment and This could be used to inform any extension of the expand the revenue base. Similarly, Government COVID-19 social protection response and to identify might consider front-loading construction elements changes required to improve its efficiency and of major programmes – such as the World Bank effectiveness. Medium-term, this analysis would be programme–tocreatemaximumshort-termemployment. helpful in developing an effective, shock-responsive system that can be scaled quickly in response to a second wave of the pandemic or to other socio- PRIORITISE GREEN AND BLUE ECONOMY economic displacement. DIVERSIFICATION The GoSL may consider identifying green and blue As the domestic economy opens and moves to economy policy options which includes focusing on recovery, the government may want to consider ‘low‐hanging fruit’ that exploit policy synergies to expanding other forms of social support to the most deliver positive economic, social and environmental vulnerable that are more self-sustaining over time. outcomes in the short to medium term. This can This could include interventions such as encouraging allow for the development of industries that reduce self-production by expanding agricultural extension carbon emissions, increase climate resilience, and tap support and distributing seedlings, seeds and other into emerging climate financing. inputs to small farmers and vulnerable families for growing basic products (beans, vegetables and tubers) in their own homes.This could be complemented ANALYSIS AND EXPANSION OF SOCIAL by making available and accessible public land for PROTECTION PROGRAMME communal cultivation of these same food items. Salaried workers most heavily impacted by COVID-19 will be those in the accommodation and food FOOD AND NUTRITION SUPPORT services, wholesale, retail and agriculture sectors. Thereportalsorecommendsatargeted delivery of a Except for agriculture where men predominate, “family food basket” to the most vulnerable women form the larger percentage of workers in the, families, who find themselves with restricted other two. And of the total number of employed females (almost half work in these two sectors), are access to marketsnow, not because of quarantine, earning lower wages than men. Given the relatively but due to not having the means to access central high percentage of informal work in the services distribution locations. Vulnerablehouseholds, sectors, it is reasonable to assume that a large particularly those with single female heads and number of the workers in these sectors are not children, should be prioritised in this latter initiative, registered under the NIC scheme but were especiallysinceleaving childrenwithoutcare may not determined to be in need of income support. be an option. A registration process can be executed simultaneously to allow for updating the country’s As tourism is forecasted to recover slowly, the databaseonthevulnerable. 3-month programme of support is likely to require an extension to at least 6 months. An expansion of the

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INCREASING FINANCIAL INCLUSION Nonetheless, UNICEF has noted that an over-reliance on online learning is likely to bias assistance towards COVID-19 provides a unique opportunity to shift better off families and its effectiveness requires towards electronic payments and advance greater teacher training in online training, uploading of financial inclusion, particularly among women. Given course material etc. A rapid expansion of online the social distancing imperatives, electronic transfers learning (including use of smartphones for could be explored as an alternative to in-person dissemination) does not appear feasible in the short- collection of social benefits. However, such a term and instead the children’s advocacy agency programme may reinforce existing inequalities as recommends the expansion of home-schooling many workers, particularly those employed which could be expanded and rolled out rapidly as informally, do not have bank accounts. A targeted both teachers and materials are already available. This initiative, in partnership with financial institutions, could be actioned through distribution of books, to design incentives that encourage and improve homework sheets and indicative timetables; weekly access to basic financial instruments such as savings phone or video calls between teachers, advice to accounts is recommended. This would facilitate rapid parents (many of whom are now at home) as to how disbursement of income support and reduce both they can contribute to, and participate in their administrative and beneficiary costs. children’s education. However, this places a great degree of responsibility on parents to supervise and EXPANDING COVERAGE OFTHE DISABILITY GRANT home teach, a task many lower income parents may Saint Lucia’s disability grant targets only children. be ill-prepared to take on and therefore is only a However, the psychological impacts of COVID-19 on partial solution. families and relationships is expected to be substantial and is likely to precipitate increases in UNICEF has also identified the need for targeted violence perpetrated against the most vulnerable. catch-up classes and, as a prerequisite, the The report therefore recommends that Government identification of students who should attend these. consider expanding this support to other disabled Gender differences in education experiences should persons and victims of sexual abuse and gender be considered here and particular attention should be based violence. This would involve dialogue and paid to the differential needs of boys and girls in the collaboration with community organisations that design of catch-up classes. Government has already work directly with those living with disabilities as well commenced planning for the re-opening of schools as with communications firms to provide improved should and the report recommends a continued access to call centers for reporting instances of whole-systems approach, including safety related violence. protocols – social distancing, hygiene, shift systems, provision of meals and curricula modifications given the loss of school days due to COVID-19. INCREASING ACCESS TO LEARNING OPPORTUNITIES FOR THE MOST VULNERABLE A REMITTANCE STRATEGY Data provided by the government of Saint Lucia shows that currently, of the 18,600 households with Given the importance of remittances, particularly members under 18 years, approximately 50% have among the most vulnerable, the channels for computers connected to the internet. To address the transmission of these funds needs to be protected. gap in internet coverage, internet service providers Firms involved in processing remittances could be can be engaged to provide low-cost options. This engaged, designated as essential service providers, expands their customer base while improving and supported to ensure that funds can continue to internet access for the poorest families. Further, it flow without incumbrance. This could include the limits the problem of educational inequalities due to provision of fee-free transactions during periods of moving to online learning by broadening access to economic shock, supported by government the internet for children in poverty. incentives and contact-less access to remittances.

2020 | UNDP, UNICEF & UN Women 26 COVID-19 HEAT Series

Annex

2020 | UNDP, UNICEF & UN Women 27 COVID-19 HEAT Series

Regression 1: Gov’t Revenue Gov’t Revenue model was run usingdata from the World Bank Data Bank, for the period 2000-2018.

Regression Results:

Dependent Variable: Total Gov't Revenue Coefficients Standard Error t Stat P-value Intercept (1,051,808,840) 73,919,049 (14.23) 0.000 Tourist Arrivals (# of tourist arrivals per year) 509 155 3.29 0.005 Population (# of residents) 5,773 855 6.75 0.000 Employment (# of persons employed) 2,039 853 2.39 0.031 n =18 R2 = 0.98

Regression Formula:

All independentvariables are statistically significant at 95% confidence interval (i.e. P-value > 0.5). Regression results shows that for every increase in 1 tourist arrival, total Gov’t revenue increases by US$509, given that population and employment data is held constant. (Below is another method to support the $500 number)

2013 Average Daily Expenditure Per Arrival ($US) $226.57 Inflation Factor (2013-2020) 103.60% 2019 Average Daily Expenditure Per Arrival $234.72 Average Length of Stay per Arrival (Days) 8.7 Total Spend per Tourist Arrival $2,042.07

Direct Contributions to Govt Rev (15% VAT) $306.31 Indirect Contributions Through Increased Corporate Pre-tax Profit $196.04 Average Operating profit in Tourism Industry 32% Corporate Tax Rate 30% Indirect Contribution in % (Operating profit X Corporate Tax Rate) 9.60%

Contributions to Government Revenue per Tourist Arrival $502.35

28 COVID-19 HEAT Series

Regression 2: GDP per capita

GDP Regression model was run usingdata from the World Bank Data Bank, for the period 2000-2018.

Regression Results:

Dependent Variable: Annual GDP per Capita Growth (%) Coefficients Standard Error t Stat P-value Intercept (0.741) 0.491 (1.508) 0.154 Services, value added (annual %growth) 0.655 0.170 3.865 0.002 Industry (including construction), value added (annual %growth) 0.158 0.040 3.962 0.001 Manufacturing, value added (annual %growth) 0.043 0.087 0.498 0.626 Agriculture, forestry, and fishing, value added (annual %growth) 0.043 0.030 1.457 0.167 n =19 R2 = 0.775

Regression Formula:

The regression equation above was used to forecast the GDPP (GDP per capita) growth rate in 2020, based on authors estimation of contractions in the various subsectors.

Sector contraction assumptions are detailed in the table below:

Sector Scenario 1 Scenario 2 Scenario 3 Services -15% -20% -25% Industry -2% -2% -2% Manufacturing -2% -2% -2% Agriculture -2% -2% -2%

29 COVID-19 HEAT Series

Regression 3: Employment

Employment Regression model was run using data from the World Bank Data Bank, for the period 2000-2018.

Regression Results:

Dependent Variable: Employment Rate (%) Coefficients Standard Error t Stat P-value Intercept (1.188) 0.666 (1.783) 0.096 Services, value added (annual %growth) 0.665 0.230 2.892 0.012 Industry (including construction), value added (annual %growth) 0.006 0.054 0.112 0.913 Manufacturing, value added (annual %growth) (0.060) 0.118 (0.512) 0.617 Agriculture, forestry, and fishing, value added (annual %growth) 0.078 0.040 1.917 0.076 n =19 R2 = 0.419

Regression Formula:

The regression equation above was used to forecast employment rate in 2020, based on authors estimation of contractions in the various subsectors.

Sector contraction assumptions are detailed in the table below:

Sector Scenario 1 Scenario 2 Scenario 3 Services -15% -20% -25% Industry -2% -2% -2% Manufacturing -2% -2% -2% Agriculture -2% -2% -2%

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